September 27th, 2022 | 13:47 CEST
Barrick Gold, Tocvan Ventures, Newmont, Glencore - Long-term positioning in gold makes sense
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"[...] One focus will be on deposits near the surface. These would be good arguments for a quick production decision using the low-cost heap leaching method. [...]" Brodie Sutherland, CEO, Tocvan Ventures
Barrick Gold, Newmont Corp - Trend broken
When investors look for gold mining stocks for their diversified portfolio, the names of the world's two largest producers immediately come to mind: Barrick Gold and Newmont. In the long term, these companies are certainly the first choice in the precious metals sector. In the short term, however, it could go one floor lower. Due to the worsening price decline, the Barrick share broke the upward trend formed since September 2015 at USD 14.64. Should this be significantly undercut, the next price target would be around USD 12.60. The negative picture is also supported by the indicators, which currently still show negative divergences.
The situation is similar for the world's largest gold producer, Newmont Corp. With the break of the upward trend at USD 44.58, the share is at the support of the course highs of 2018 and 2019. A break of these levels should open up further downward potential to the area around USD 30.
Meanwhile, the two majors are satisfied with their joint venture Nevada Gold Mines, in which Barrick holds a majority stake of 61.5%, while Newmont holds the remaining shares. Since the joint venture's inception three years ago, NGM has produced 10 million ounces of gold and distributed significant cash flows to the joint venture partners. In addition, NGM has 14.7 million ounces of proven and probable mineral reserves and 8.5 million ounces of inferred mineral resources. This growth was compounded by Barrick's 100% owned Fourmile project with 0.35 million ounces of indicated mineral resources and 2.2 million ounces of inferred mineral resources as of December 31, 2021, which is not currently included in the NGM joint venture.
Tocvan Ventures - Two golden irons in the fire
In addition to investing in established gold producers, it makes perfect sense to include younger exploration companies in the portfolio for diversification purposes in order to benefit disproportionately from the expected long-term increase in gold and silver prices. That is because companies with promising properties, such as Tocvan Ventures, which is active in Mexico, historically perform with leverage, both downwards and upwards, compared to the base price.
With Pilar and El Picacho, the Canadians own two gold and silver projects in the state of Sonora. Sonora produces about 40% of Mexico's gold. Both of Tocvan's projects are located near producing mines or larger projects that are moving toward development. Near Pilar alone, there are three major projects within a radius of up to 80 km: Osisko Development's San Antonio Project, Minera Alamos' Sanatana Mine, and Argonaut Gold's La Colorada Mine.
Based on data acquisition evaluations and surface assessment of the San Ramon prospect within the El Picacho gold-silver project, Tocvan Ventures believes San Ramon is a high-priority target with mineralization from surface to a depth of at least 60m, extending over a 500m trend and open in all directions.
With the end of the rainy season in Mexico, management plans to start drilling at San Ramon. These will target the 500 x 500m area, which has shown high-grade gold at surface and in underground workings, the potential for a near-surface bulk tonnage target. It is to be followed by assays at Javali and Cornea. A total of 15,000m of drilling and 2,000m of trenching are planned. The next phase of exploration and development at the Pilar project is also being planned. Here, 2,000m of infill and 3,000m of step-out drilling are planned.
Overall, word of the Company's recent successes is likely to spread to major regional producers. A potential acquisition by a larger producer in the near future would not come as a surprise. The stock's market capitalization, which is traded in Toronto and Frankfurt, is CAD 24.60 million.
Glencore - The rock in the surf
Despite the correction currently underway in the commodities sector, the share price of the world's largest group of companies in commodities trading and mining is holding steady at a high level. After a six-fold increase in the price since March 2020 to GBP 548, a reduction in the overbought condition of only around 15% has followed.
The Swiss' latest achievement is the acquisition of Newmont's 18.75% stake in the MARA project. Upon completion of the transaction, Glencore will own 43.75% of MARA. Under the terms of the agreement, Glencore will pay USD 124.9 million at closing and a deferred payment of USD 30 million at commercial production, subject to an annual interest charge of 6%. The total amount of the deferred payment is capped at USD 50 million.
The MARA project in the Catamarca province of Argentina is a high-grade, long-life, low-risk brownfield project. It was established in December 2020 as a joint venture between Yamana Gold, Glencore and Newmont, following the integration of the Minera Alumbrera plant and mining infrastructure and the Agua Rica project. Under the new structure, Yamana Gold will remain the operator with a 56.25% interest in MARA, while Glencore will own the remaining shares. On a 100% basis, MARA has proven and probable mineral reserves of 5.4 million tonnes of copper and 7.4 million ounces of gold contained in 1.105 billion tonnes of ore. The original life is 28 years.
The precious metals sector is still in a correction. Concerns about further interest rate hikes and the strong US dollar caused gold to mark new lows for the year. However, it seems unlikely that interest rates will continue to rise drastically in the long term. Long-term investment options among gold producers are Barrick Gold and Newmont. Among exploration companies, Tocvan Ventures shows great potential.
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